Dow Slumps 800+ on Deficit Fears
Stocks sold off on Wednesday, pressured by a sharp spike higher in Treasury yields as traders grew worried that a new U.S. budget bill would put even more stress on the country’s already large deficit.
The Dow Jones Industrials cratered 816.8 points, or 1.9%, to 41,860.44
The S&P 500 tumbled 95.85 points, or 1.6%, to 5,844.61.
The NASDAQ Composite plunged 270.07 points, or 1.4%, to 18,872.64.
The 30-year Treasury bond yield last traded around 5.08%, the highest level going back to October 2023. The benchmark 10-year Treasury note yield traded at 4.59%.
Long-dated bonds sold off as traders worried a new budget bill would worsen the U.S. deficit. The measure is expected to pass as lawmakers reach a compromise on state and local tax deductions heading into Speaker Mike Johnson’s Memorial Day deadline. Yields spiked even higher after a poor afternoon auction for 20-year debt, raising fears investors may be losing their appetite for funding America’s deficits.
Target shares dropped 5.2% after the big box retailer cut its full-year sales outlook, with executives citing tariff uncertainty and a backlash to the company’s pullback in diversity, equity and inclusion efforts.
UnitedHealth was the worst-performing Dow member, losing 5.8% following a downgrade from HSBC. Major tech-related stocks Apple and Amazon also dropped as rates increased.
Wednesday’s action comes after a tough session for the three major averages. The S&P 500 ended a six-day win streak, while the NASDAQ saw its first negative day in three.
The latest moves come as traders look to Washington as Republican leaders work to finalize a budget bill that would lower taxes.
However, the measure has faced pressure from GOP members looking for higher deductions on state and local taxes. Investors also worry the measure could worsen the U.S. deficit.
Prices for the 10-year Treasury subsided Wednesday, lifting yields to 4.6% from Tuesday’s 4.48%. Treasury prices and yields move in opposite directions.
Oil prices lurched lower 68 cents to $61.35 U.S. a barrel.
Prices for gold hiked $37.10 to $3,321.70.
